Adams, from Detroit, became aware of it when her sister, who suffers from schizophrenia, moved in with her and debt collection phone calls came with her.

Her sister had taken out a payday loan for a boyfriend but didn’t remember doing so.

“She was getting all these phone calls, threatening her with jail,” Adams said. “I started taking the phone calls.”

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With the help of a debt resolution company, she reached a settlement with the payday loan company for $600 in May. But the balance with interest and fees had ballooned to $3,500.

“The interest is astronomical,” Adams said. “It’s our poorest populations they target. They don’t want people who can pay it back in two weeks. That’s how they make their money.”

The six-year-old Consumer Financial Protection Bureau oversees lending nationally for the U.S. government. For the first time, it’s proposing a national rule that would require lenders to verify that borrowers can afford the loans, allow for no more than three loans at a time, and limit the number of times lenders can try to debit borrowers’ bank accounts.

In Michigan

There are more than 500 companies registered to make payday loans in Michigan. Most are small storefronts in strip malls with names like Check ‘N Go, Advance America, or Check Into Cash.

There are also online lenders. Television viewers are likely familiar with the cartoonish superhero pushing the online lender CashNetUSA.com.

Michigan calls the payday loans Deferred Presentments. In exchange for cash, the borrower writes a check for the amount plus a fee that the lender will cash, usually in two weeks.

Michigan is among the two-thirds of U.S. states that allow lenders to offer the loans.

Payday loans are criticized for high annual percentage interest rates that create a debt cycle that many borrowers can’t get out of.

Despite the criticisms, payday lending is big business.

There are 20,600 lenders making payday loans in the U.S., according to the Community Financial Services of Association of America, far more than the 14,000 McDonald’s restaurants in the U.S. They lend $38.5 billion in the short loans to 12 million people.

In Michigan, there are about 540 McDonald’s restaurants, and more than 520 licensed payday lenders.

Payday lenders have made 1,751,730 payday loans from January to October so far this year, loaning out $796,809,878. The average load was just under $455 each. That means payday lending is on pace to finish this year with more than 2.3 million and worth more than $1 billion.

But there are complaints – 423 of them in Michigan to the Consumer Financial Protection Bureau about payday loans, many about debt collection processes. They come from around the state, some from highly affluent areas like Orchard Lake Village and Bloomfield Hills.

Jamie Fulmer, senior vice president for payday lender Advance America, is critical of the proposed rules from the CFPB.

“Leave it to the government to come up with 1,700 pages of rules and regulations that govern a $400 loan,” Fulmer said. “The rule as it’s written is a complicated theory of arbitrary regulations and requirements that are going to prohibit consumers from getting the loans, they need.”

While the mission of the CFPB as an advocate is necessary, Fulmer said it is not accountable to anyone.

Fulmer admits, “There needs to be a common sense approach so consumers can be sure that the products they use in the marketplace are safe, but you have to balance those protections with the ability for consumers to access credit.”

“This rule completely disregards the concerns and needs of actual borrowers, who value this credit option,” Fulmer said, adding that the industry is already regulated by rules put into place by each state.

Michigan Legislation

While the CFPB is moving towards standardizing, and tightening, some practices of payday lenders, Michigan lawmakers have introduced legislation to expand the types of loans payday lenders can offer.

Senate Bills 430-432 would allow payday lenders to offer high-dollar loans with fees still equal to triple digit interest rates. The bills are in committee and haven’t moved, so far.

But the Community Economic Development Association of Michigan said the legislation would establish larger loans that are unaffordable. For example, loans would jump to maximum amounts of $2,500 with repayment terms of up to years, but annual interest rates of up to 180 percent.

Herman Starks is a Detroit minister who volunteers with the advocacy group Michigan United, which has taken a position against payday lending.

“I don’t think anyone should be able to lend money that could be hazardous to the community,” Starks said. “It’s almost the same as the housing crisis. (Payday lenders) should have the same limits on banks. If banks can’t do things like that, why should they be able to?”

Adams, whose sister got the difficulties with payday lenders, said the new federal rule proposed by the CFPB doesn’t go far enough to protect consumers.

“We have to provide an alternative for people who are caught up in an emergency and need cash,” Adams said.